26 November 2007

Transportation, Energy and Peak Oil

Oil prices will go up. They are at almost an all time high of $100 a barrel as it stands. The fundamentals point in that direction. No significant quantities of new oil from mineral sources is being produced and the easiest to use big supplies have already been identified.

While we will get far more than current reserves in the long run with more technologically intensive methods, the technologies needed to do so will get more and more expenses, and so the availability of cheap oil will decline. Industrialization in places like China and India, will inevitably cause demand to surge. The result is increasing prices. The fancy name for this phenomena is Peak Oil.

The primary impact of these predicted rising oil prices is on the transportation sector. The dominant use of oil is in the transportation sector. Within the transportation sector, moreover, the overwhelming use of oil is as fuel and for engine lubrication for cars and trucks where there is the greatest impact.

It is also used in trains, boats and aircraft, and as components of other products, but those uses are a much smaller share of the total.

Freight Trains

Trains, particularly freight trains, are overwhelmingly diesel-electric hybrids (except for intracity electric passenger trains and some high speed rail passenger trains not found in the United States). Trains far more fuel efficient than cars and trucks, making them a desirable alternative to cars and trucks as oil prices rise, whenever the form a reasonable substitute. Also trains can be refitted to use different fuels like coal, electricity, or natural gas, simply by redesigning locomotives (not always all that dramatically, in many cases an existing chassis and electric transmission of power to the drive train could be retained with only the power plant replaced). So, the bulk of the rolling stock inventory doesn't have to be replaced.

The main problem with a shift to trains are that the system has been optimized for highly efficient, slow bulk transportation. Many freight rail systems are basically one way, one lane or two way, two lane highways, with few passing lanes, so one slow heavy bulk service train can prevent express deliveries from arriving on time.

Also, while all the technology for intermodal containerized shipping exists, in practice, the freight rail system is primarily set up to handle bulk shipments of commodities like coal and grain. There are freight rail stations all over the nation near key industrial centers, but many lack the ability to swiftly and efficiently transfer shipping containers to trucks for local delivery.

Still, the cost of upgrading our intercity freight transportation system so that medium speed trains with container cargo would carry freight most of the way, deferring to trucks only for local delivery from the nearest train station, would be fairly modest and technologically unambitious, while saving vast amounts of fuel, increasing road safety, reducing wear and tear on existing roads, and smoothing the way for a transition to electric vehicles which work best for short range trips.

Within a decade of the time that diesel hits $8 a gallon, I expect that the lion's share of intercity freight now carried by truck will instead be carried in shipping containers first by train and then by truck locally. Freight rail's market share will grow in a lagging lock step with oil prices.

Passenger Trains

A viable passenger rail system would probably have to be build using high speed rail on dedicate passenger rail lines which could also be used for small, time sensitive package delivery, on the model of the Northeast Corridor.

Existing Amtrak service is virtually useless outside the Northeast Corridor. It isn't time competitive with passenger vehicles, and struggles to keep pace with commercial intercity buses. It is also plagued with long delays, most of which are due to competition with slow moving freight traffic. Amtrak manages to stay price competitive with intercity buses only through massive federal subsidies of operating costs. And, the routes where this kind of high speed rail service makes sense often doesn't overlap with existing Amtrak lines (e.g. the I-25 corridor).

This new system would have to be developed more or less from scratch, with interim systems using "passing lanes" in the freight system designed to carry time sensitive container shipments. Thus, real passenger rail could lag a couple of decades behind freight rail innovations, leaving the United States economy hurting compared to better prepared European and Japanese economies with high speed rail systems already in place.

In a mature expensive oil economy high speed passenger rail would handles most medium distance trips. Local trips would still be by some form of motor vehicle, probably an electric or biofuel one, or an intracity transit system (bus and/or rail), due to incompatibility of high speed rail with frequent stops. Aircraft would still retain the edge for all but the most bargain basement long distance travel, because aircraft are so much faster, and because existing crippled passenger boarding systems would work better with a more elite smaller volume passenger load.

Cars, Trucks and Buses

During the transition from a cheap oil economy, where personal cars and trucks are the dominant means of transportation, to a mature expensive oil economy, when high speed rail was not on line, people would cope by making far greater use of bus service between cities. The fuel cost per passenger mile is much lower (particularly for families with pre-hybrid vehicles, if a hybrid electric bus is used), and as fuel prices rise this cost advantage would draw in middle class business and family passengers, who previously would have taken their own vehicles.

Cars and trucks won't go away. But, they will be used differently and many will have different fuels.

Electric vehicles with current technology are viable in all but range, particularly at modest speeds (e.g. up to 55 mph rather than 80 mph). This will make electric vehicles popular in compact urban areas as oil prices rise much faster than electricity prices. If you rarely drive more than 50 miles a day, and don't get onto interstate highways outside of rush hour, an electric vehicle is perfect. Electric vehicles are a good fit for commuting, routine grocery shopping and errands, and for local deliveries. Also, there is no reason that a big vehicle, like a minivan, commercial van or semi-tractor trailer can't be electric or hybrid electic. The technology scales up and down well.

As people transition to electric vehicles, the market to rent liquid fuel vehicles for occasional out of town trips should grow.

Rural personal motor vehicles will probably become ethanol-gasoline mix hybrid electric drives or diesel-electric hybrid drives. Buses and trucks that must serve intercity trips will probably convert to diesel-electric hybrids, probably with at least some biodiesel in the mix.

Hybrid electric vehicles are already commercially viable, even though the extra cost of a hybrid doesn't justify the reduced gasoline consumption at current gasoline prices. As oil prices rise and hybrids go into larger scale production and lose some of their novelty, they seem likely to become the dominant form of engine for cars and trucks.

If there are major improvements in battery technology, electric cars could simply entirely replace gasoline and diesel cars with very little adjustment to the overall transportation system, but the better battery has proved to be a tough nut to crack. This kind of development would also put great pressure on the electricity industry to increase production and improve conservation in current uses.

Natural gas is also an option, but requires lots of new infrastructure and will be growing more expensive a few steps behind corresponding increases in oil prices, even though it is almost as clean as electricity in generating pollution (probably cleaner overall if the source of the electricity is coal).


Boats are a fairly small part of the total and have a fair amount of flexibility to use alternative fuels. They could return to the coal age of the steamer. They could use modern more efficient sails. They could use biodiesels in amounts that wouldn't deplete the entire agricultural output of the nation. Boats are far more fuel efficient per mile traveled than cars and trucks in any case.


Aircraft demand has much greater ability to absorb increasing oil prices than other transportation modes, so the main effect on rising oil prices on the aircraft industry will be higher ticket prices. The truly cost conscious travelers like those grabbing discount tickets to the Caribbean, and families taking trips where rail is a possibility but a strain, would be the first to stop traveling by air. Business travel and affluent tourists are likely to continue to fly.

Coal Derivatives

Electricity and biofuels aren't the only alternatives to petroleum and natural gas based fuels. Another likely replacement in cars, trucks, trains, boats, homes and power plants are hydrocarbon gases and liquids derived from coal.

It has been done, and Montana is building plants to do it. There is likely some energy loss in the conversion process and the jury is still out on how clean the conversion process is likely to be.

At worst, it could generate all the pollution associated with a coal fired power plant at the time of conversion (on top of all the environmental and safety hazards associated with coal mining). The products would also be at least as polluting as the natural gas and/or gasoline or diesel they are replacing when used. Still, even then, it isn't a total waste, as it creates of gas or liquid fuel product that is more convenient to use than electricity in many instances, and the supply of coal is effectively limitless.

At best, the process could also much more effectively sequester the pollutants associated with burning coal and even sequester the CO2 produced in the process, producing environmental impacts significant less that using coal outright, and if the output were prodominantly a gas state fuel, rather than a liquid, the combustion of the fuel itself could be reasonable clean.

I suspect that a mix of electricity, biofuels, natural gas and synthetic coal based products will probably power the ground vehicles of 2040, as petroleum based gasoline and diesel become too expensive outside of particular niche markets.

Land Use and Lifestyle Changes

Any way you cut it, even with replacement technologies, the cost of transportation will almost certainly go up.

There could be some market response with increased teleconferencing, videoconferencing, and other forms of online collaboration.

This could also result in a pullback of large physical inventory from point of sale. Heavier items like vehicles, appliances and furniture might be reviewed in a display store and then special ordered in most cases to minimize the need to phyiscally move them. Even where demand was fairly predictable, for say, refrigerators in a large metropolitan area, there might be an increased tendency to have containers of finished goods stored at a warehouse at a railhead in the metropolitan area and then delivered from there to a customer within a day or two of purchase after a purchase was made at a display store.

Some physical items like reference books and professional journals and advertising will likely continue to move to electronic form from physical form in the face of rising transportation costs. Likewise e-communication will likely replace communication by letter more and more.

Locally grown food products would get a slight edge as transportation costs rise.

I suspect that the most noticable life style change, however, will be in land use. Simply put, it will be more expensive to live in the exurbs and more distant suburbs, and more and more affordable to live in central cities and inner ring suburbs. Cities like Castle Rock and Longmont, seemingly designed for couples who both have long commutes to different cities, could be hard hit indeed, as the pressure to localize increases.

The result may be higher density, more mixed use development, more transit oriented development, and a wealth inversion, as central cities become affluent, while suburbs become poorer. The sterotype of the poor families crowding onto a city bus could be replaced with that of double sized buses of working class people living in the suburbs making their way to central business districts, perhaps after having first taken a neighborhood shuttle or bicycle or motorcycle or microcar to the central bus stop.

Oil prices don't greatly impact many energy sectors.

Outside some recalcitrant holdovers in the Northeast (mostly homeowners) and Alaska, almost nobody uses heating oil for space heating. Outside Alaska, Hawaii and some rural generators, almost nobody uses oil to generate electricity any more. Some oil is used in other industries in products like fertilizers, plastics and non-transportation lubricants, but this is a small share of the total.

Peak oil will pressure farmers to shift from oil based fertilizers to organic ones. It will make plastic more expensive, curtailing its use in low budget disposable applications. It will encourage R&D departments to develop animal and vegetable oil based lubricants, a change which unlike a massive conversion to ethanol and biodiesel would not require the vast majority of the agricultural output of the nation to be converted to vegetable oil production.


Michael Malak said...

No mention of new nuclear power plants making hydrogen to put in our hydrogen-fueled cars?

Another fuel even more exciting than hydrogen is compressed air.

Finally a nit to "a wealth inversion, as central cities become affluent, while suburbs become poorer":

Cities were always for the wealthy. Europeans don't have the attitude of those in the U.S., which was created by the FHA in the 1930's with its enforced segregation and redlining.

It would be more accurate to call it a wealth reversion.

Andrew Oh-Willeke said...

Still there. Implicit in an electric car regime, which I predict, is some form of battery. They could very well be a fuel cell which is a hydrogen fueled power plant. But, it is really a battery type and not a fuel type.

I'd talk more about nuclear power as a source of electricity if I were talking more about electricity generation, but I still think that it is one of the best increased electricity demand responses out there.